NCPA - National Center for Policy Analysis

Supporting Small Business Is the Way to Economic Recovery

May 9, 2013

America is the land of opportunity, a country where a person can pick themselves up by their bootstraps and build a better life. There is no better way to accomplish this than by creating a new firm. In fact, small businesses, companies with fewer than 500 employees, drive a majority of job growth. Our economic recovery and job growth hinge on lawmakers' ability and willingness to support small business, says the U.S. Chamber of Commerce.

  • Over the long run, small businesses account for approximately 66 percent of all net new job creation.
  • Older, larger firms are less innovative, typically meaning that job growth slows down as institutional bureaucracy increases and new firms enter the market with more innovative ideas.
  • Currently, unemployment remains at 8 percent and gross domestic product is weak, despite high stock prices and strong corporate profits.

The reason the employment sector is struggling is because policymakers are not supporting enough entrepreneurs. Pro-enterprise programs should support ethnic, social and generational changes that will continue to transition the economy into the next millennium. Programs should support immigrants, women and the millennial generation, which, based on recent measurements, may be somewhat less entrepreneurial than their predecessors.

  • Increasingly, new firms are single-person enterprises, often baby boomers, who work for themselves, making up more than 70 percent of America's 27 million companies with annual sales of $887 billion.
  • States and cities should do everything they can to support small business development through pragmatic economic policymaking that lowers barriers to entry and encourages firm start-up.

Among the many innovative approaches are accelerator initiatives that focus on starting high-growth firms by turning startups into enduring companies and business plan competitions to identify companies with exciting ideas and high potential. In addition, states can:

  • Promote seed and venture funds that focus on startups and expanding firms.
  • Encourage networking and collaboration initiatives that bring small businesses and self-employed entrepreneurs together with large companies and universities.
  • Streamline state administrative processes.
  • Develop workforce training initiatives that help small businesses attain and attract the skills they need.

Source: Praxis Strategy Group and Joel Kotkin, "Enterprising States: Getting Down to Small Business," U.S. Chamber of Commerce, April 2013.


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